Chile Policy Makers Unanimous on September Rate Decision

Chilean policy makers were unanimous
in their decision to keep the benchmark interest rate unchanged
at 5 percent last month, and didn’t discuss a rate increase or
cut, minutes of the meeting showed.

The central bank last changed borrowing costs in January,
when it made a quarter-point reduction that surprised economists
surveyed by Bloomberg. A tight labor market ruled out another
rate reduction, while slower inflation removed pressure for an
increase, according to the minutes posted on the central bank
website today.

Policy makers lowered their inflation forecast and raised
growth estimates the week before the meeting, indicating that
borrowing costs would remain at current levels in the short
term. Still, changes in the global economy may rapidly alter the
outlook for Chile, board member Sebastian Claro wrote in a
presentation yesterday.

“In the aggregate, external conditions faced by Chile’s
economy are favorable for now,” he wrote in the presentation
posted on the bank website. “The favorable conditions -- raw
material prices and foreign interest rates -- are transitory in
part. They also could change significantly if the external
situation deteriorates.”

Chile’s peso, which has gained 9.6 percent against the U.S.
dollar this year, slid 0.2 percent to 474.11 per U.S. dollar at
8:44 a.m. Santiago time.

Inflation Forecast

Policy makers, who target 3 percent inflation plus or minus
1 percentage point over two years, on Sept. 5 lowered their 2012
inflation forecast to 2.5 percent from the 2.7 percent estimated
in June. They also raised their economic growth estimate to
between 4.75 percent and 5.25 percent from 4 percent to 5
percent.

Gross domestic product in the world’s leading copper
producer rose 5.5 percent in the second quarter from 2011, the
fastest expansion in a year. Inflation slowed to 2.6 percent in
August from 4.2 percent in the first month of this year.